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Russia: Taxes and Costs

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High, flat taxes for non-residents

INDIVIDUAL TAXATION

Non-resident individuals are subject to tax on their Russian-sourced income. Married couples are taxed separately.

INCOME TAX

Non-residents are liable to tax at a flat rate of 30%, generally withheld at source. No deductions or allowances are available for nonresidents.

Rental Income

Rental income received by non-resident individuals is taxed at a flat rate of 30%, which is generally withheld at source.

Rental income earned by foreign legal entities without a permanent establishment in Russia is subject to withholding income tax levied on gross rentals at 20%.

Capital Gains

Capital gains realized by non-resident individuals are subject to tax at a flat rate of 30%. Taxable gains are the gross proceeds or selling price, without deductions for acquisition costs or other expenses.

VALUE ADDED TAX (VAT)

Generally, leasing land as well as property is subject to 18% VAT. But lease of residential properties are exempt from VAT.

Sale of land and residential property is exempt from VAT.

CORPORATE TAXATION

INCOME TAX

Rental Income

The rental income of landlords operating through a Russian subsidiary or a branch of a foreign legal entity which is considered as a PE (permanent establishment) is subject to a general 24% profits tax. As of 01 January 2005, the federal portion is 6.5% and the regional portion is 17.5%. The regional states may decrease the tax rate by a maximum of 4 percentage points, resulting in a regional portion of at least 13.5%. Therefore the effective corporate tax rate can be between 20% and 24%. The tax is calculated on gross revenues, less almost all economically justified business related expenses.

Interest on debt taken out to finance investments in immovable property is profits tax deductible. The interest rate should not deviate from interest on comparable loans by more than 20%. If there are no comparable loans issued, interest can be deducted at a rate of up to 15% on loans taken out in foreign currency, or the Bank of Russia refinancing rate multiplied by 1.1 for ruble loans.

Capital Gains

Gains from sale of real property are included in ordinary business profits and taxed at a rate of 24% (local authorities could potentially reduce the rate to at least 20%). Taxable profits from sale of property by Russian companies and branches of foreign entities having permanent establishments in Russia are calculated as gross sales proceeds less the net tax book value of the property.

Gross capital gains earned by foreign companies without a permanent establishment in Russia are withheld at a tax rate of 20%. In cases wherein acquisition costs can be confirmed by appropriate documents, applicable tax rate is 24% levied on the sales margin (gross sales price less acquisition costs).

PROPERTY TAX

Land Tax

Land tax is a municipal tax levied on the cadastral land value and the applicable rate varies depending on the use of the land. At the federal level, the maximum rate for agricultural land and land used for housing is 0.3% and 1.5% for other types of land. At the municipal level, the applicable rates are set by the relevant municipality where the land is located.

Property Tax

The property tax rate is set at the municipal level and should not exceed 2.2%. The tax base of property tax is the net book value of the property. There may be local tax allowances.

Russia - more data and information

• Guide to buying houses and registering property sales in Russia

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